Sequenom Fires CEO Stylli, Four Others After Test Probe

By

Thomas Gryta and

Kathy Shwiff

Updated Sept. 29, 2009 12:01 am ET

Sequenom Inc.
said it dismissed Chief Executive Harry Stylli and four others after an independent panel of directors found the company failed to adequately police its studies of a noninvasive prenatal test for Down's syndrome.

The San Diego company already sells a DNA analysis platform, but Wall Street has been waiting for the results of the independent investigation of the "mishandling" of data related to the company's SEQureDx Trisomy 21 prenatal tests, projected to have a huge market.

Trading in Sequenom shares was halted prior to the news late Monday after closing up 3.3% at $5.69 on the New York Stock Exchange. In after-hours trading, the stock was down 43% to $3.22, close to the low of $2.86 hit in the wake of the initial disclosure of the issues in April.

At the time, Sequenom said the issues raised concerns regarding the integrity of data related to the test.

On Monday, Sequenom reiterated that it is no longer relying on those data, and it warned the public not to rely on them.

"This has been a significant setback and the company will face challenges ahead," said Chairman Harry Hixson, who was named interim chief executive. He said the company will continue forward with its existing business strategy.

The terminations of Mr. Stylli and Elizabeth Dragon, senior vice president of research and development, are effective immediately. The board also asked Mr. Stylli to resign as a director.

The panel's investigation concluded that the company failed to put adequate protocols, controls and supervision in place as it attempted to proceed from researching molecular diagnostic tests to developing and commercializing those tests.

Because of those shortfalls, the test data and results in the company's program to develop a Down's syndrome test included "inadequately substantiated claims, inconsistencies and errors." Deficiencies in disclosure controls and procedures led to those results being reported to the public.

In response to the issue, the board is implementing new disclosure procedures, organizational changes, new processes for research and development and enhanced worker training.

Sequenom said that members of the special committee and its independent counsel will make a presentation to staff of the Securities and Exchange Commission. In June, Sequenom said the SEC had begun an investigation into its April disclosure related to the test.

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